If the High Council of Finance (CSF), on the tax level, does not seem very active any more, on the other hand, its section “Needs of financing” is not idle. The body has just made last Friday a rather robust opinion on the budgetary trajectories to be privileged to face the audit of the European Commission. In summary, the CSF recommends reducing the public deficit by 2.1% of GDP over the next three years, which is a trifle of 12 billion euros.
It must be said that in the current state of the discussions, well in place, the Commission will be much more intransigent than in the past for our public finances. The European institution had indeed let go of the public spending of the Member States with regard to the health crisis first, then the war in Ukraine. This was called the general derogation clause, which allowed member states to spend more to deal with the crisis, without suffering the wrath of the European institution. But this famous clause will be deactivated at the end of 2023. Even if Ecolo and the PS, above all, say they oppose it, no more temporary deviations from the normally applicable budgetary requirements will be allowed with the quasi-confirmed proposal which is on the table. The Stability and Growth Pact and its objectives to be met (maximum 3% of GDP deficit, public debt ratio to be reduced to around 60% of GDP, in particular) will therefore be remembered fondly by Belgium.
Contributions to the federal budget: banks castigate the new contribution increase for the deposit guarantee
2024, election year
And this is where the report of the High Council of Finance (CSF) comes in. To ensure the sustainability of our public finances, above all to guarantee the maintenance of the debt at prudent levels in the medium term (3 to 5 years), in accordance with the new debt sustainability framework issued by the Commission (Debt Sustainability Analysis Framework, or DSA), the CSF has developed three scenarios. The third, which is not the strictest but the safest to meet these main objectives (stabilization of the debt, return to the 3% deficit by 2026) more quickly is to reduce the deficit by 2.1% of GDP by 2026, with the bulk of the effort in 2024. Admittedly, the last budgetary conclave, in view of a situation less bad than hoped (slightly stronger growth, employment on the right track and above all a fall energy prices), led to an agreement on an additional effort of 1.8 billion euros, or 0.3% of GDP for 2023-2024. The deficit expected in 2024 by Vivaldi is now 4.3% of GDP (for all levels of power), or 25.7 billion euros.
With the big ladle – the context remains uncertain and the variables are changing rapidly – we would therefore need roughly 10 billion more reductions over the next 3 years to go from red to orange with our public finances. And stabilize our debt at around 105% of GDP. This effort is colossal, but still weaker than that postulated by the Federal Planning Bureau in February (nearly 20 billion reduction in the deficit over the next 4 years). The problem, above all, is that the year that concentrates the most efforts to be made is… an election year. But as we can read between the lines of the CSF report, if this effort is not made quickly enough, this will further inflate the effort to be made by the next government. The spring of 2024, which will mark the return of the famous “European budgetary rules” will therefore be hot for the next executive. “In any case, it will take a much more ambitious and precise program than that of this legislature, which only gives birth to minimal reforms.”, estimates this government source. Whose act?